6 reasons to consider POBO and COBO

category IN-HOUSE BANK

by Jaakko Kilpinen

reading time 3 min

Take a step further in in-house banking and boost the efficiency of your organization’s financial processes with POBO (payment-on-behalf-of) and COBO (collection-on-behalf-of). Here are 6 reasons why it pays off.

Building an in-house bank is typically the final stage in a project that sets out to centralize an organization’s treasury. After the treasury has already begun providing the group companies with a variety of bank services – financing, cash management, FX hedging, and investment handling, among others – it might be time to consider completing the centralization and implementing payments and collections on-behalf-of structures, POBO and COBO.

POBO and COBO boost the efficiency and transparency of the financial processes further, rationalizing the external banking structure and maximizing the benefits of in-house banking. Typically, they are the preferred choice of large corporations with multiple subsidiaries in multiple countries and substantial annual turnover.

In practice, these approaches are set up exactly as their name implies.

  • In POBO, the treasury makes the payments on behalf of the subsidiaries using a single external account, typically per currency. The payments are booked in the appropriate subsidiary’s internal account in the in-house bank.
  • And in COBO, the treasury collects the incoming payments on behalf of the subsidiaries using a single account, usually per currency. Payment transactions are booked to the appropriate subsidiary’s internal account in the in-house bank.

If you want to see how these on-behalf-of structures are set up in an in-house bank, download our whitepaper, where we cover both POBO and COBO in detail. In this blog, we will take a look at the top reasons why you should consider payments and collections on-behalf-of.

The benefits of POBO and COBO


These on-behalf-of structures help corporations to achieve operational and cost efficiency in their cash and liquidity management through ultimate centralization and economies of scale. The benefits of both POBO and COBO include:  

  • Maximized transparency: Enhanced visibility and control over group-wide cash flows maximizes transparency and gives group treasury the widest opportunities to manage cash in real time. In addition, cash forecasting, based on centralized information, is more reliable and enables you to better manage your group’s debts and investments.
  • Simplified banking relationships: With POBO and COBO, you can concentrate payments and collections into one external channel, for example, using a single account per currency. This allows you to limit the number of external bank accounts in the group and simplify banking relationships at group level – not to mention the reduction in bank and transaction fees.

The benefits of payments on-behalf-of


With payments on-behalf-of, a group treasury can simplify cash management further using an in-house bank or a payment factory structure. The results:

  • Optimized payments: When group treasury is in charge of making payments-on-behalf-of the subsidiaries, you can optimize the process and always select the most cost-efficient payment method as well as the most suitable banking connection. You are also free to round up payments according to your own criteria. In an in-house bank setup, the selection of the external account to be used can be automated based on the currency of the payment, for example.
  • Reduced risk of fraud: Centralizing payments means fewer people are involved in the process, which helps to reduce the risk of internal abuse. This is also true of group-wide harmonization of the payment process. With a centralized payment factory and POBO approach, you will know when and where the cash is flowing out of the group. Clear visibility makes it easier to detect and tackle payment fraud.

The benefits of collections on-behalf-of


Collections-on-behalf-of goes one step further, not only giving treasurers better visibility over the group’s liquidity position but also providing faster access to cash. Benefits of COBO include:

  • Optimized working capital management: Centralizing the collection of receivables at group level can have a huge impact on the working capital management of the entire organization. When you in the treasury hold the reins of both outgoing and incoming cash flows, it becomes easier to cover the cash shortfalls in one place with the excess liquidity elsewhere in the group.
  • Maximized independence: Implementing both POBO and COBO, a group treasury can reach the highest level of independence from banks by reducing the number of bank accounts to a minimum. You will also be better placed to negotiate pricing with your few selected cash management banks using economies of scale.

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